Surrogate López Torres ESTATE OF ANTHONY J. LOGRIPPO, Deceased (11-1834/A) — In this contested turnover proceeding, Salvatore Torre (Torre) moves for partial summary judgment dismissing certain claims asserted by Anthony LoGrippo Jr. and Joann Tighe (co-executors), co-executors of the estate of Anthony J. LoGrippo. The co-executors oppose Torre’s partial summary judgment motion and cross-move to compel Torre to comply with a purported pre-litigation escrow stipulation. BACKGROUND / FACTUAL ALLEGATIONS Anthony J. LoGrippo (decedent) died on March 11, 2011, survived by his two adult children, the co-executors herein. The decedent and Torre were each 50 percent shareholders of Bon Chef, Inc. (Bon Chef), a food service industry supplier headquartered in Brooklyn with a factory located in New Jersey. They each were also 50 percent shareholders of Saltony, LLC and 205 Route 94, LLC, the limited liability companies that served as special purpose entities for Bon Chefs real estate holdings (together with Bon Chef, the companies). At the root of the dispute between the co-executors and Torre is $10,000,000 in life insurance proceeds and how much of that amount should be applied to Torre’s buyout of the decedent’s estate’s share of the companies. The co-executors argue that the entire amount must be paid to the decedent’s estate. Torre argues that pursuant to the shareholders’ agreement in effect at the time of the decedent’s death, 50 percent of the actual value of the companies which is substantially less than $10,000,000, should be paid to the decedent’s estate.1 In or around the year 2000, the decedent and Torre entered into a shareholders’ agreement that set forth, inter alia, the contractual obligations of the shareholders in the event of one’s death. Pursuant to that original agreement, the shareholders were obligated to maintain $10,000,000 in life insurance coverage on each shareholder’s life. The agreement incorporated “certificates of value” which at the time valued the companies in the combined amount of $4,900,000. However, the agreement provided that in the event of death, the $10,000,000 in life insurance proceeds would be the minimum price for the buyout of the deceased shareholder’s interest, without regard to the actual value of the companies at the time of death. This buyout agreement remained in place between the two shareholders until 2005, when an amended agreement was executed. Respondent’s Version of Facts According to Torre, sometime in 2004, the two shareholders sought to amend their shareholders’ agreement and engaged Nicholas San Filippo, Esq. of Lowenstein Sadler, who had served as corporate counsel for Bon Chef for many years. Mr. San Filippo, along with associates at the firm, handled the drafting of the “Amended and Restated Shareholders’ Agreement” (amended agreement). Torre asserts that meetings were held on November 30, 2004 and on May 3, 2005 with himself, the decedent, and Mr. San Filippo and his associates in attendance to discuss the amended agreement. Torre asserts that at the November 30, 2004 meeting, both shareholders expressed their wishes for changes to the existing shareholders’ agreement, including the buyout provisions. Following that meeting, Mr. San Filippo prepared drafts of the amended agreement. The parties then met again on May 3, 2005 at Lowenstein Sadler to discuss the drafts of the amended agreement. At that meeting, both shareholders specifically discussed their wish to amend the existing buyout agreement to allow the surviving shareholder to retain any excess from the $10,000,000 in life insurance proceeds, after deduction of half of the actual value of the companies at the time of death. Thereafter, a final draft of the amended agreement was sent to both shareholders and they each signed the document on or around June 1, 2005.2 Torre asserts that he had no questions concerning the final draft of the amended agreement nor any doubt that the agreement accurately reflected the agreed-upon terms as discussed in the meetings with Mr. San Filippo. Torre further asserts that, contemporaneously with the signing of the amended agreement, each shareholder executed changes in beneficiary for one of the life insurance policies to name the other shareholder as beneficiary in place of their spouses, further proving that both shareholders understood and agreed to the new buyout provision.3 Mr. San Filippo submits an affidavit supporting Torre’s version of the facts surrounding the amended agreement and states that various amendments to the shareholders’ agreement were discussed at the November 30, 2004 meeting. However, it was during the May 3, 2005 meeting that the shareholders stated that they both agreed that the $10,000,000 in insurance on each other’s life was in excess of the 50 percent fair value of the companies and may, in the future, continue to be in excess of the fair value. Accordingly, the shareholders agreed that in the event the $10,000,000 in insurance proceeds exceeded 50 percent of the value of the companies, the surviving shareholder would retain such excess proceeds. Mr. San Filippo states that among other things, the shareholders discussed that in the event the decedent was the survivor, the decedent could use the excess proceeds as a cash infusion to help replace Torre with another executive. Following this meeting, a final draft was forwarded to the shareholders, which both the decedent and Torre signed, without further comment or questions. Co-Executors’ Version of Facts The co-executors dispute that the amended agreement reflects the decedent’s wishes and argue that there was a “scrivener’s error” or “mutual mistake” that occurred during the drafting and signing of the amended agreement. As a result, there was a significant change in the buyout provision, which the decedent did not understand nor to which he agreed. The co-executors further argue that using one law firm to represent both the decedent and Torre resulted in an “unconscionable unbalanced arrangement” rife with breaches of fiduciary obligations by both Torre and Mr. San Filippo. The co-executors further assert that when Mr. San Filippo provided drafts of the amended agreement to the shareholders, no writing of any kind was provided to the decedent to clarify the dramatic change to the buyout provision. The co-executors also contend that on March 22, 2011, shortly following the decedent’s death, co-executor Anthony LoGrippo, Jr. spoke to Mr. San Filippo, who stated that the amended agreement required the full life insurance proceeds to be paid to the estate. The co-executors argue that this statement is a party admission to be imputed to Torre, since Mr. San Filippo was speaking as counsel for the companies. The co-executors also allege that Mr. San Filippo had several private conversations with Torre in May 2005, to the exclusion of the decedent, and which resulted in additional revisions to the drafts of the amended agreement. The co-executors further allege that around the same time, there were negotiations for Bon Chefs possible buyout of the decedent’s shares while he was alive, and that Mr. San Filippo did not act as neutral counsel for the companies, but as personal counsel to Torre. In that regard, the co-executors point to an email authored by Mr. San Filippo on July 1, 2005 which indicates that during the negotiations between the shareholders as to a buyout price, Mr. San Filippo appeared to have been providing ex parte strategic advice to Torre.4 The co-executors also allege that during this time period, Torre maintained a corporate entity separate from Bon Chef, for the sole purpose of embezzling income earned through Bon Chefs business to benefit himself and his spouse. In support of the allegation, the co-executors provide a copy of an email from Torre dated November 27, 2006 to a vendor named Punjab Stainless Steel Industries, stating, “If you can make it out to Global Purchasing, Inc. [the side entity]. And hand deliver it I would appreciate it.” The co-executors in furtherance of their allegations submit emails which appear to show that on or about February 3, 2010, Torre advised Mr. San Filippo that a bank had ceased doing business with Bon Chef because Torre attempted to fraudulently deposit checks into his personal account. That is, Torre made out corporate checks to vendors for whom Bon Chef had very old accounts payables on the books; but rather than send the checks to the vendors, Torre endorsed the checks and deposited them into his personal account. The co-executors allege that both Torre and Mr. San Filippo, whose ethical duty was to act in the interest of both shareholders, concealed this possibly criminal activity to the detriment of the decedent’s interests in Bon Chef. The co-executors also submit the affidavit of Frank Nocera, a long-time friend of the decedent, who states that the decedent had made statements to him up to the time of his death, that the agreement between the shareholders was that should a shareholder die, his family would be paid the full $10,000,000 in life insurance proceeds and the surviving shareholder would become the owner of all shares in the companies.5 The Amended Agreement The parties have submitted copies of the original shareholders’ agreement, and two drafts of the amended agreement dated June 4, 2004 and June 8, 2004, three undated drafts, and the final signed amended agreement. The June 4, 2004 draft states, in pertinent part, that each shareholder is obligated to purchase and maintain in effect insurance policies on the other shareholder’s life in an amount no less than $11,500,000, and in the event of the death of one shareholder, the purchase price shall be the total amount of all of the proceeds received by the surviving shareholders on any life insurance policies. Two separate drafts both dated June 8, 2004 state essentially the same with respect to the buyout method, except lowers the amount of required insurance coverage to $5,000,000. Another undated draft states that $8,800,000 in life insurance coverage is required and a second undated draft states that $10,000,000 is required. The finalized amended agreement dated June 1, 2005 states that $10,000,000 is required and that the aggregate amount of the life insurance policies shall “be used to fund the collective buyout of the decedent’s entire equity interest in all three entities.” The amended agreement further provides that in the event of a shareholder’s death, “the purchase price shall be the per share company value,” and defines “company value” in formulaic terms which essentially equals to Bon Chef’s assets minus the debts at the time of valuation. The amended agreement’s buyout provision also refers to Exhibit D to the amended agreement, which lists the life insurance policies that were in effect at the time totaling $10,000,000 for each shareholder. Exhibit D further states that each shareholder is the beneficiary for all three policies on the other beneficiary’s life. Exhibit D also notes that the beneficiary information on the $5,100,000 policies reflect the changes made on the afore-mentioned change of beneficiary forms dated June 1, 2005. THE INSTANT MOTION AND CROSS-MOTION Respondent’s Motion for Partial Summary Judgment Torre moves for partial summary judgment pursuant to CPLR 3212, seeking dismissal of two of the co-executors’ seven claims. Those claims seek (1) a turnover of the $10,000,000 life insurance proceeds to the estate and (2) reformation of the amended agreement on the grounds of scrivener’s error and mutual mistake.6 Torre argues that the co-executors’ second claim should be dismissed because: (a) there is no evidence to support the co-executors’ allegation that a mutual mistake occurred during the drafting of the amended agreement; (b) there is nothing to indicate that the decedent did not read, understand or assent to the amended agreement’s terms; (c) there is no evidence to support the co-executors” claim that a scrivener’s error occurred during the drafting of the amended agreement; and (d) the prior drafts of the amended agreement are not binding between the shareholders. Torre further argues that the co-executors’ first claim, the turnover of the life insurance proceeds, should be dismissed since it is merely derivative of the second claim. In opposition, the co-executors argue that triable issues of fact exist warranting the denial of summary judgment on the grounds that: (a) Torre and Mr. San Filippo concealed their breaches of fiduciary duty to the decedent; (b) there were conflicts of interest among Torre and Mr. San Filippo at the time the shareholders’ agreement was being amended; (c) Torre and Mr. San Filippo engaged in other inequitable conduct at the time the amended agreement was being drafted; (d) writings exchanged between Torre and Mr. San Filippo and/or his associates indicate that the decedent’s estate was to receive $10,000,000; (e) the decedent’s statements to his children and others prior to his death were to the effect that he understood his estate would receive $10,000,000 upon his death; and (f) Torre, through his counsel Mr. San Filippo, made the admission to the co-executors that pursuant to the amended agreement, the $10,000,000 was to be paid to the decedent’s estate. Co-Executor’s Cross-Motion to Enforce the Parties’ Stipulated Escrow Agreement The co-executors cross-move pursuant to CPLR 2104, to compel Torre to comply with an alleged escrow agreement dated August 10, 2011, which provided that the $10,000,000 life insurance proceeds were to be maintained in an escrow account until resolution of this proceeding. In support, the co-executors submit copies of emails exchanged between attorneys for the co-executors and Torre that discuss the possibility that some of the proceeds be used to pay off a loan and other expenses, and placing the rest in an escrow account. The co-executors argue that based upon the discussions, Torre must comply by immediately returning $3,000,000 of the $10,000,000, which they contend has been spent by Torre and his spouse. Torre opposes the cross-motion and argues that the emails discussing the material terms of the escrow agreement did not contain every agreed-upon term and therefore, there was no “meeting of the minds” and thus, no binding agreement. Further, Torre argues that CPLR 2104 is inapplicable because the escrow agreement was discussed eleven months prior to commencement of any litigation, and thus, there was no “‘pending action” at the time of the alleged escrow agreement. SUMMARY JUDGMENT STANDARDS Summary judgment is a drastic remedy that may be granted only where there is an absence of any material issues of fact requiring a trial. See CPLR §3212(b); Vega v. Restani. Const. Corp., 18 N.Y.3d 499, 503 (2012). The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law by tendering evidence to demonstrate the absence of any material issues of fact. Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 (1986). Failure to make this initial showing requires a denial of the motion, “regardless of the sufficiency of the opposing papers.” Winegrad v. New York Univ. Med. Center, 64 N.Y.2d 851, 853 (1985). In reviewing the sufficiency of the proponent’s submissions, the facts must be carefully viewed “in the light most favorable to the non-moving party.” Ortiz v. Varsity Holdings, LLC, 18 N.Y.3d 335, 339 (2011). Once a prima facie showing is made, the burden of going forward shifts to the party opposing the motion. The opponent must produce evidentiary proof sufficient to establish the existence of material issues of fact requiring a trial of the action. Chance v. Felder, 33 A.D.3d 645 (2d Dep’t 2006). Upon consideration of a motion for summary judgment, a court is required to accept the evidence tendered by the opponent as true, and “must deny the motion if there is even arguably any doubt as to the existence of a triable issue.” Barker v. Briarcliff School Dist., 205 A.D.2d 652, 653 (2d Dep’t 1994). The court’s function in deciding a summary judgment motion is issue finding rather than issue determination. Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404 (1957). The remedy may not be granted “unless it appears that no material triable issues of fact exist.” Phillips v. Kantor & Co., 31 N.Y.2d 307 (1972). However, “mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient” to defeat a motion for summary judgment. Zuckerman v. City of New York, 49 N.Y.2d 557, 562 (1980). DISCUSSION Torre’s Motion for Partial Summary Judgment The parties agree that New Jersey’s substantive law applies to the claims insofar as the amended agreement contains a provision stating that the agreement is “governed by and construed in accordance with” the laws of New Jersey.7 “A basic tenet of contract interpretation is that contract terms should be given their plain and ordinary meaning.” Kernahan v. Home Warranty Adm’r of Florida, Inc., 236 N.J. 301, 321(NJ Sup. Ct. 2019). Under New Jersey law, “[t]he traditional grounds justifying reformation of an instrument are either mutual mistake or unilateral mistake by one party and fraud or unconscionable conduct by the other.” St. Pius X House of Retreats v. Diocese of Camden, 88 N.J. 571, 577 (1982). Further, “[a] party who enters into a contract in writing, without any fraud or imposition being practiced upon him, is conclusively presumed to understand and assent to its terms and legal effect.” Kernahan at 321 (internal quotations and citations omitted). The plain and ordinary meaning of the buyout provision in the amended agreement is that in the event of a shareholder’s death, the surviving shareholder is entitled to the $10,000,000 in life insurance proceeds, which would then fund, in whole or in part, the buyout of the deceased shareholder’s estate’s interests in the companies. The purchase price for the buyout of a deceased shareholder’s interests is stated in plain and unambiguous terms: “For purchases and sales pursuant to Section 4.02 (Death of a Shareholder), the Purchase Price shall be the Per Share Company Value.” The agreement also explicitly defines “Company Value” as a formula which essentially accounts for the companies’ assets minus the companies’ debts. The question then turns to whether there is any triable issue of material fact as to the co-executors’ claim for reformation of the amended agreement. As noted, the buyout and purchase price provisions are clear and there is no indication elsewhere in the agreement to suspect a scrivener’s error. In fact, Exhibit D, which clearly identifies the life insurance policies and sets forth that each shareholder is the beneficiary on all three of the other’s policies, supports the buyout provision as plainly stated in the body of the amended agreement. Further, there is no evidence of a mutual mistake on the part of the shareholders when they executed the amended agreement. Torre denies that he misunderstood the buyout provisions in the amended agreement, and the co-executors have set forth no objective evidence indicating that Torre himself misunderstood. Accordingly, there can be no finding of a mutual mistake warranting reformation of the amended agreement. As for a unilateral mistake on the part of the decedent, there is no evidence that raises a triable issue of material fact to counter the indisputable evidence that the decedent signed an agreement that is unambiguous. In that regard, the affidavit of the decedent’s friend, Mr. Nocera, is inconsequential. Mr. Nocera states in the most general terms that the decedent informed him on many occasions, up to the year of his death, that should a shareholder die, “the family gets the insurance and the survivor get the business.” Even if Mr. Nocera’s recollections are accepted as true, the statements are insufficient to raise a triable issue of fact. Having signed the agreement, the decedent “is conclusively presumed to [have understood] and assent[ed] to its terms and legal effect.” Kernahan at 321. Notably, Mr. Nocera does not reference the amended agreement and the circumstances surrounding the execution of same. Whatever the decedent may have said to Mr. Nocera, even if accepted as true, does not negate the clear documentary evidence and the strong presumption that the decedent understood the agreement which he signed. In any event, an allegation of unilateral mistake must be coupled with fraud or unconscionable conduct on the part of the other party to an agreement. St. Pius X House of Retreats at 577. The co-executors submit evidence of dishonest conduct on the part of Torre that may have directly affected the companies’ bottom line. That evidence is outlined in emails and Torre’s own writings that have not been refuted. Torre’s conduct insofar as the management of the business’ income and assets while the decedent was alive is troubling.8 However, the undisputed evidence is that the decedent signed the amended agreement which is unambiguous on its face. Furthermore, the decedent signed a change in beneficiary form with respect to the $5.1M life insurance policy contemporaneously with the amended agreement, as did Torre. There can be no other explanation for why the shareholders each signed a change in beneficiary form to make the other the beneficiary, if not for the fact that they both had understood and agreed on the new buyout provision. The co-executors also question the lack of any memoranda from Mr. Filippo to the decedent explaining the drastic change in the buyout provision, as well as Mr. Filippo’s own conduct that tends to give the appearance that he at times acted as counsel for Torre rather than for the companies, i.e., both shareholders. However, there is no evidence that any questionable conduct on the part of Torre or Mr. Filippo was related to the drafting and execution of the amended agreement. Since the decedent is not here to testify as to the facts, the two documents he signed are the strongest and the only reliable evidence of his intentions. The decedent was a businessman for many years and a 50 percent owner of a thriving multi-million-dollar business. There is no evidence to doubt that he understood the content and the gravity of what he was signing. Moreover, while there are allegations of fraudulent or unconscionable conduct on the part of Torre with respect to the companies’ finances, there is no indication that there was misconduct with respect to the drafting and execution of the amended agreement. Both shareholders stood on equal footing at the time of the execution of the amended agreement. To accept that Torre and Mr. Filippo may have schemed to deprive the decedent’s estate with a fraudulently induced agreement, the court would have to believe that they somehow predicted that the decedent would predecease Torre years later. While the court must construe the facts in a light most favorable to the co-executors, the court need not engage in such far-fetched suppositions. Zuckerman v. City of New York, 49 N.Y.2d 557, 562 (1980). Based upon the foregoing, the court finds that there are no material issues of fact warranting a trial on the issue of reformation of the amended agreement. Therefore, the co-executors’ second claim is dismissed. Consequently, the co-executors’ first claim for a turnover of the $10,000,000 in life insurance proceeds is also dismissed as derivative of the second claim. Co-Executors Cross-Motion to Enforce Escrow Agreement The court now turns to the co-executors’ cross-motion to enforce a purported escrow agreement and to compel Torre to return $3,000,000 of the $10,000,000 in life insurance proceeds that have been expended. The record indicates that Torre collected $8,000,000 in insurance proceeds and placed the funds in his personal account. The remaining $2,000,000 was placed in Torre’s counsel’s escrow account pursuant to a formal written agreement that was executed at the insistence of the insurance company. Further, counsel for the parties discussed by email that of the funds deposited in Torre’s personal account, $2,000,000 would be used to obtain a release for the decedent’s personal guaranty on a loan and to provide some working capital for the business; and that Torre agrees “not to dissipate” the remaining $6,000,000. Thereafter, the parties reduced the agreement to a formal, written agreement that in addition to the $2,000,000 already in escrow, an additional $5,000,000 will be held in escrow. However, the agreement was never signed by Torre. The emails exchanged between counsel are not indicative of a binding stipulation, and therefore, there is no stipulation to be enforced. CPLR 2104; Forcelli v. Gelco Corp., (“An agreement between parties or their attorneys relating to any matter in an action …is not binding upon a party unless it is in a writing subscribed by him or his attorney”). In any event, in an affirmation dated April 30, 2012, Torre’s counsel represented that in addition to the $2,000,000 held in an escrow account, $5,000,000 was being held in an attorney trust account, for a total of $7,000,000 ostensibly being available to satisfy a judgment or a settlement of the co-executors’ claims. Accordingly, the co-executors’ cross-motion is denied. CONCLUSION All other arguments have been considered and found unavailing or otherwise moot. For the foregoing reasons, Torre’s motion for partial summary judgment dismissing the Co-Executors’ first and second claims is granted and are dismissed, and the Co-Executors’ cross-motion is denied. This constitutes the decision and order of the court. Dated: November 6, 2019
